Want to make money? All confusion cleared! Do this and you are set for life

Mutual fund investment is gaining popularity in all sections of society. However, the investors are quite often found confused as to which category — small-cap, mid-cap and large-cap — is the best investment option so that they can get top profit on their investment. However, if we go by the tax and investment experts, it does not return that an investor should be looking at, but his or her risk appetite and investment goal, which matters. Or else, you will end up with losses! 

Balwant Jain, a Mumbai-based tax and investment expert said, "While choosing an investment product, you have to consider various factors and not alone the risk appetite. What is the use of risk appetite when your ability to take risk has almost come down to nil?  So one should invest in small-cap funds when one has risk appetite coupled with risk-taking ability as well a time horizon of at least ten years to accumulate the corpus for the required goal."

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Advising mutual fund investors not to chase returns Balwant Jain said, "Do not chase returns and get into small-cap mutual fund schemes for a short-term. That is a sure way to lose money. Choose small-cap mutual fund schemes if you have a long-term investment horizon and a high-risk appetite. Continue with your investments or hold them for the long term to earn big returns. "

Speaking on small-cap, mid-cap and large-cap mutual funds Manikaran Singh, a SEBI registered tax and investment expert said, "While making an investment decision and selecting one's fund, an investor must keep in mind that for which goal he or she is investing. On the basis of that, one needs to select its fund. The investor who is in the early phase of one's career can opt more risk by choosing equity-linked mutual funds or small-cap funds but again the risk appetite has a major role. If the investor is least interested in risk but wants returns better than PPF, VPF and Bank FDs, the large-cap funds are suitable for him or her.

Speaking on the difference in returns on the small-cap and large-cap mutual funds in long-term perspective Balwant Jain said, "Difference in returns between a large-cap mutual fund and a small-cap mutual fund is around 4 per cent provided the investment is for more than 10 years. But, only returns is not the single variable that would decide the fund. As I said earlier, an investor should choose one's fund according to his or her risk appetite."